Tài liệu Internationnal payment a case study of freight forwarding and logistics companies in vietnam luận văn thạc sĩ

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY HUYØNH NGOÏC MINH THÖ INTERNATIONAL PAYMENT: A CASE STUDY OF FREIGHT FORWARDING AND LOGISTICS COMPANIES IN VIETNAM MASTER’S THESIS IN BANKING HOCHIMINH CITY, 2010 2 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY Huyønh Ngoïc Minh Thö INTERNATIONAL PAYMENT: A case study of Freight Forwarding and Logistics Companies in Vietnam MASTER’S THESIS In Banking Ology code: 60.31.12 Supervisor As. Pro. Dr. Leâ Thaønh Laân Hochiminh City, 2010 3 Preface Firstly, I would like to express my deepest appreciation to my Sponsor, Dr. Le Thanh Lan, for his precious guidance, comments and suggestions. This paper is one of the last compulsory elements of Banking program at the University of Economics Hochiminh City. The objective of this subject is to find out the new appropriate mode of international payment that is more suitable and convenient to import and export enterprises in Vietnam, especially for small and medium ones. This is accomplished via a survey and literature research. I hope it can be applied to a practical situation. I would like to assure that the research of “International Payment: A case study of freight forwarding and logistics companies in Vietnam” was carried out by me under instruction of As. Pro. Dr. Le Thanh Lan. All figures illustrated in this paper are honest, accurate and quoted from a reliable source. Ho Chi Minh City, October 2010, Huynh Ngoc Minh Thu ĐIỂM MỚI CỦA ĐỀ TÀI Luận văn với đề tài: “International Payment: A case study of Forwarding and Logistics Companies in Vietnam” của tác giả Huỳnh Ngọc Minh Thư, Người hướng dẫn khoa học: PGS. TS. Lê Thành Lân, giới thiệu dịch vụ thanh tóan quốc tế theo phương thức C.A.D và C.O.D do các công ty giao nhận ngoại thương đảm nhiệm, dành cho các đơn đặt hàng lẻ, số lượng ít, giá trị không cao, gắn với dịch vụ giao hàng tận nhà thông dụng của các doanh nghiệp này. Dịch vụ này còn mới mẻ ở Việt Nam nhưng lại không xa lạ ở nước ngòai. Việc ứng dụng phưong thức thanh toán mới này tại Việt Nam sẽ thuận tiện và an toàn hơn, tiết kiệm được chi phí, thời gian, giúp nâng cao hiệu quả hoạt động xuất nhập khẩu cũng như giao nhận ngoại thương, đồng thời nối dài dịch vụ thanh tóan quốc tế ra ngòai trụ sở của ngân hàng thương mại. 4 TABLE OF CONTENTS Preface. .............................................................................................................................3 Table of contents. ............................................................................................................4 List of firgure....................................................................................................................8 List of tables .....................................................................................................................9 Abbreviation...................................................................................................................10 1. Chapter 1: Introduction. ............................................................................11 1.1. Introduction.......................................................................................................11 1.2. Research background........................................................................................11 1.3. Problem statement ............................................................................................13 1.4. Research objective.............................................................................................13 1.5. Scope and methodology of the study ..............................................................13 1.5.1. Scope of the study ..................................................................................13 1.5.2. Research method ....................................................................................14 1.6. Structure of the study........................................................................................14 2. Chapter 2: Literature Review. .................................................................. 16 2.1. Introduction. .....................................................................................................16 2.2. COD/CAD in international payment..............................................................16 2.2.1. Payment process .....................................................................................17 2.2.2. Condition for CAD/COD application .................................................19 2.2.3. Advantages and disadvantages of CAD/COD 2.3. Forwarding and logistics companies. ...............................................................21 2.3.1. Definition ................................................................................................21 2.3.2. Characteristics .........................................................................................22 2.3.3. Functions.................................................................................................24 2.4. Conclusion. ........................................................................................................27 3. Chapter 3: Methodology........................................................................... 28 5 3.1. Introduction.......................................................................................................28 3.2. Business research...............................................................................................28 3.3. Research design .................................................................................................29 3.4. Pilot test .............................................................................................................30 3.5. Main survey........................................................................................................31 3.6. Conclusion .........................................................................................................32 4. Chapter 4: Settling CAD/COD via forwarding and logistics companies 33 4.1. Introduction.......................................................................................................33 4.2. Forwarding and logistics in international payment, in reality.........................33 4.3. Encroaching of forwarding and logistics companies in international payment..............................................................................................................35 4.4. Undertaking CAD via forwarding and logistics companies. ........................36 4.4.1. Procedure for settling CAD via freight forwarders..............................36 4.4.1.1. Payment process.............................................................................36 4.4.1.2. Document required........................................................................38 4.4.1.3. Conditions to apply........................................................................39 4.4.2. Advantages of undertaking CAD via forwarding and logistics companies. ..................................................................................................39 4.4.2.1. Advantages to the Importer ..........................................................39 4.4.2.2. Advantages to the Exporter ..........................................................40 4.4.3. Significances of applying CAD via forwarding and logistics companies ...................................................................................................40 4.4.3.1. Time savings...................................................................................41 4.4.3.2. The cargo situation has been well checked and monitored.........41 4.4.3.3. Eliminating fraudulent shipping documents ................................42 4.4.3.4. More choice for import export customers ...................................42 4.4.3.5. Avoiding risk in payment...............................................................43 4.4.4. Role of commercial banks in CAD/COD once being settled via freight forwarders.......................................................................................43 6 4.4.4.1. Currency exchange.........................................................................44 4.4.4.2. Overseas money transfers..............................................................44 4.5. Customer’s behaviors towards settling payment via freight forwarders........44 4.5.1. What do local Import Export companies say? .....................................45 4.5.1.1. Difficulties in settling payment via the banks and forwwarder’s workarounds. ......................................................................................49 4.5.1.2. How much convenient do they feel? ............................................50 4.5.1.3. Opinions about time saving ..........................................................50 4.5.1.4. Ideas regarding collection fees ......................................................51 4.5.1.5. Point of views in terms of maximum of goods............................50 4.5.2. What do local International Forwarding and Logistics companies say?51 4.5.2.1. Background for local forwarding and logistics staffs in international payment.........................................................................51 4.5.2.2. Experiences of local staffs in international payment. ..................51 4.5.2.3. Interest and willingness to participate in international payment.52 4.6. Petition to the authorities .................................................................................52 4.6.1. Solution for forwarding and logistics companies ..............................52 4.6.1.1. Training and employing. ................................................................52 4.6.1.2. Expanding network........................................................................54 4.6.1.3. Upgrading the IT system. ..............................................................55 4.6.1.4. Advising customer to diversify foreign currencies in settling payment to reduce the dollarization effect. ......................................56 4.6.2. Petition to the government. ...................................................................58 4.6.2.1. Allow this new method of payments ............................................58 4.6.2.2. Public companies main achievements and their problems in an open system. .......................................................................................58 4.6.3. Petition to the Customs Division ..........................................................59 4.6.3.1. Publishing enterprises black list. ...................................................59 4.6.3.2. Being accustomed to new methods of payment ..........................60 7 4.6.4. Petition to the State Bank of Vietnam...................................................59 4.6.5. Petition to the Commercial Banks.........................................................60 4.6.6. Market sharing with Post Offices and express services .......................61 4.6.6.1. Nature of goods .............................................................................61 4.6.6.2. Size of goods ..................................................................................62 4.6.6.3. Value of goods ...............................................................................62 4.7. Conclusion .........................................................................................................62 5. Chapter 5: Conclusion and imlication...................................................... 63 5.1. Introduction.......................................................................................................63 5.2. Conclusion of the study ....................................................................................63 5.3. Implication of the study....................................................................................64 5.4. Limitation and recommendations for further research ..................................65 Appendix....................................................................................................... 67 Reference ...................................................................................................... 90 8 LIST OF FIGURE Figure 2.1. CAD/COD payment process. ...................................................................17 Figure 4.1: Payment process of undertaking CAD via forwarding and logistics companies.......................................................................................................................36 9 LIST OF TABLES Table 4.1: Respondents’ profiles in partern. ................................................................45 Table 4.2. Respondents’ profiles in pfrequency of using CAD/COD ......................45 Table 4.3. KMO and Bartlett’s test...............................................................................46 Table 4.4. Cronbach Alpha Test ..................................................................................47 Table 4.5. Coefficients ..................................................................................................48 10 ABBREVIATION CAD : Cash against Document CIF : Cost, Insurance and Freight COD : Cash on Delivery D/A : Documents against Acceptance D/P : Documents against Payment D/OT : Delivery of documents on other terms and conditions FOB : Free On Board GDP : Gross Domestic Product L/C : Letter of Credit LCL : Less-Than-Container Load SMEs : Small and medium enterprises T/T : Telegraphic transfer UNCTAD : United Nations Conference on Trade and Development WTO : World Trade Organization 11 1. Chapter I: INTRODUCTION 1.1. Introduction. This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study. An introdcution to the methodology to be used and the scope of the study is also addressed in this chapter. At the end of the chapter, the structure of this study is provided. The ouline of this chapter are as follows: 1.1 Introduction 1.2 Research background 1.3 Problems Statement 1.4 Research objective Scope and methodology of the 1.5 1.6 study Structure of the study 1.2. Research background Foreign trade activities have become increasingly important in the economic development of the country, especially in current time, when Vietnam became a member of WTO and we are now still in the process of industrialization and modernization. As a key element which cannot be lacking in foreign trade activities, international payment more and more increases its important role and position in the economy. It is considered as an indispensable tool, and essential link in economic relations, and trade between countries around the world. International 12 payment forms an important part in promoting domestic financial markets integrating into the world. International payment arises from import and export activities and then it turns back to support and creates good conditions for foreign trade development. It is an essential basis to the formation and development of international financial relations, circulation of goods and services, as well as money rotation. It helps to promote and lubricate import and export activities, foreign investment, services, strengthens drawing overseas remittances and other financial resources. However, international payment is very sophisticated because the participating subjects differ in geography as well as in culture, economics and politics. Therefore, the participants are always interested in finding out the most effective payment method which brings least risks for both importer and exporter. In Vietnam, T/T, Collection, L/C are the most common methods selected in international payments, subject to the demand and agreement from the participants. In order to expand overseas market, enterprises should base on a reliable payment system. One of safe and effective channel of payment so far is settling via commercial banks, and especially the vital role of Vietnamese overseas commercial counselors in providing valuable information for local banks and businesses. However, there is still another intermediary who can approach and control merchandise, monitor clearly and thoroughly cargo situation as well as routine and transit time in specific. They are forwarding companies and logistics companies. While carrying out their business, they can know exactly the delivery date, the cargo and they even can act as a reliable representative on behalf of the importer or exporter in specific cases. With remarkable advantages, forwarding and logistics companies can participate and perform very well the role of a key chain in international payments. Settling via international freight forwarding and logistic 13 companies is a remarkable payment method which is safer, quicker, cheaper, and especially suitable for small lots, samples, or shipment of particular goods. 1.3. Problems Statement. Telegraphic Transfer (T/T), Collection (D/A, D/P, D/OT…), Letter of Credit (L/C) are main methods of payment generally applied in Vietnam so far. Each of them has its own advantages and disadvantages so the report will try to find out a new method which can harmonize and meet the needs of low value merchandises. It’s settling CAD/COD via forwarding and logistics companies. 1.4. Research objective. The report is supposed to analyze the current situation of international payment in Vietnam then to find out the new appropriate mode of international payment that is more suitable and convenient to local import and export enterprises, especially for small and medium entities. This new method will save time and costs, also being safe for small and regular inbound and outbound merchandises, especially for small air cargo, scare and perishable goods, samples… By getting feedback from customers who daily deal with overseas payments, the report will summarize particularities, limitations and conditions of this new method: i.e. CAD/COD via international freight forwarding and logistics companies. 1.5. Scope and methodology of the study. 1.5.1. Scope of the study The research will approach the case study of forwarding and logistics companies in Vietnam. All data will be got and collected from bank’s website, annual report, published studies from different local and foreign universities and articles from books and journals…. Besides, an online survey to key staff of import export companies, email interview to the person in charges of overseas forwarders as well 14 as direct interview with managers of local forwarders in Vietnam has been conducted in order to collect primary data. 1.5.2. Research method An online survey was posted at the link below: http://spreadsheets.google.com/viewform?formkey=cEZFbElNUmJfaURBWnN3 VDJseEJOUVE6MA.. , it dispensed to 120 key staff of import export companies and there are a total of 82 executives, approximate by 68.33% of the participation, response to this survey. Due to geographical distance, we have conducted an e-mail interview to overseas international forwarding and logistics companies located in 15 main import export markets of Vietnam over the world such as in United States of America, France, Switzerland, Belgium, Australia, Korea, Hong Kong, China, Taiwan, Japan, Thailand, Indonesia, Malaysia, Pakistan, United Arab Emirates and luckily get 100% response from them. 73.33% of participations accept this method of payment and willing to cooperate with Vietnamese correspondents, then settling payment without problem. 1.6. Structure of the study. The study consists of 6 main section: 15 1 Introduction 2 Literature Review 3 Methodology Settling CAD/COD via 4 5 Forwarding and logistics companies in Vietnam Conclusions and Implications This is a new method which has not been applied in Vietnam so far. Hence, there is still deficiency of experience on its implementation. Consequently, there will be unavoidable shortcomings in this report. The valuable appraisement, contributions, judgment and suggestion from the Board of Examiners will be highly expected and grateful appreciated. 16 2. Chapter 2: LITERATURE REVIEW 2.1. Introduction The previous chapter introduces an overview of the study background, the rationale of the study, the research objective and the research question. This chapter searches and reviews relevant theories in the literature. The aim of this review is to develop CAD/COD via the commercial banks to CAD/COD via freight forwarding and logistics companies. 2.1 Introduction 2.2 COD/CAD in international payment 2.3 Forwarding and logistics companies 2.4 Conclusion 2.2. CAD/COD in international payment Whether it is a trade debt settlement, a unilateral funds transfer, a capital investment, or so on... the reasons for such payments between countries, the methods of implementing and accounting for them are matters of concern to economists and national governments. International debts are settled either from accumulated balances of foreign currency, claims on foreign currency, by loans from creditor lent to debtor, by drawing on the International Monetary Funds, or by utilizing the national gold reserves. How a country balances its international accounts is one of the most important decisions for its balance of payments 17 Cash against documents is a type of transaction in which the importer, basing on the sales contract, requests the exporter’s bank open a trust account in order to settle payment to the exporter upon receiving all necessary documents as negotiated. Settling COD/CAD via post office has been implemented by Saigon Post before 1975. It also carried out by forwarders around the world, mostly in EU, USA, and some developing country nearby Vietnam, such as Thailand, Indonesia, Singapore, Hong Kong, Taiwan… Many UEH Master Thesis major on international payment, especially focus on L/C method, such as Du Minh Sen, Perfecting operation skills in L/C method at Incombank, 1998; Nguyen Thi Ngoc Mai, Developing L/C method at Vietin Bank, Long An Branch, 2008; Hoang Thi Hai Yen, Developing L/C method in settling payment for import cargo at Vietin Bank, Hochiminh Branch, 2010, but there no topic major on CAD/COD was found in library database. This method of payment has been compilated on lectures in international payment of authors specialized in this field such as Dr. Tran Hoang Ngan, International Payment, Publisher of Statistic, 2001 (page 244-245), MSc. Ho Thanh Tung, Lectures of International Payment, TDT University, 2009, with payment process are as follows: 2.2.1. Payment process. SALES CONTRACT (3) CARGO EXPORTER T/T (5) (4) IMPORTER (2) (1) (6) THE BANK DOCUMENT 18 Firgure 2.1. CAD/COD payment process (1) Basing on the sales contract with an international customer, the importer requests the exporter’s bank open a trust account for 100% value of goods contracted. This amount will be settled in favor of the exporter according to a memorandum between both sides. (2) The bank notifies to the exporter. (3) The exporter ships all merchandises to the importer as per the terms and conditions negotiated in the sales contract. (4) The exporter submits all necessary documents as required. (5) The bank carefully check all document against the memorandum, if they meet all requirements, the bank will disburse to the exporter from the importer’s trust account. (6) The bank then releases all documents pertaining to the transaction to the buyer and closes the trust account. Many banks charge fees for cashing against documentary transactions. In some instances, the seller bears all bank charges. However, it is more common for buyers to cover these charges at the end of each transaction. Typically, the seller adds bank charges to the invoice value, as all bank charges are deducted from the trustee account upon payment. 2.2.2. Condition for CAD/COD application. 19  This method of payment should be applied in case both importer and exporter totally trust each other.  Merchandises should be so precious and scarce.  The transaction should be performed rapidly in a short period of time.  It requires the importer’s representative in exporter’s country to attest cargo delivery. 2.2.3. Advantages and disadvantages of CAD/COD. Further to Mr. R..N.Bose, Institute of Banking studies, Calcutta, West Bengaal, India, CAD/COD is safer than T/T, D/A, faster and more saving cost than L/C as well.  Disadvantages to the Exporter: o There is no guarantee that the Importer will take delivery of the consignment. No agreement or contract can force an Importer to accept the consignment. o If Importer wishes to play truant and delays taking delivery, it may lead to demurrages and other incidental costs, compromising Exporter’s bargaining power. o Legal remedy for breach of contract applies a long and costly process. o In case of failure of the Importer, the Exporter would either have to pay the cost of carriage for bringing back the goods, or find out an alternate Importer at the same or a new destination – leading to additional costs. o The trust account can be cancelled by the importer at any time. Otherwise, it needs a multilateral agreement between importer – exporter and the bank